Subsidy-free solar powers UK's renewable energy attractiveness

Despite a large drop in renewable energy investment in 2017, the UK has climbed three places in a ranking of the world's most attractive renewable energy markets for investors, thanks to a move towards subsidy-free solar PV.

It was widely expected that many projects would be unable to compete in the post-ROC environment, but many new projects are beginning to compete in the subsidy-free era

EY reports that the UK investment environment had settled in recent months as the market adapted following a plethora of cuts to subsidies and feed-in-tariffs (FITs) combined with the closure of Renewables Obligation (RO) applications last year.

“Government subsidies for clean power are being reduced around the world and financiers are anticipating tougher times ahead for project developers,” EY’s global power & utilities corporate finance leader Ben Warren said.

“However, movements in the Index suggest that these developments are just headwinds as the renewable energy sector continues to mature and markets expand.”

Subsidy-free growth

The rise has been partly attributed to the success of the country’s first subsidy-free solar farm in Bedfordshire and is compounded by growing onshore wind projects and moves to repower old wind farms, according to EY.

Opened in September 2017, the 10MW farm in Clayhill, Bedfordshire, is co-located with a 6MW battery storage facility and was developed after the RO subsidy scheme closed to new applicants. The solar farm is expected to deliver enough electricity to power around 2,500 homes and save 4,452 tonnes of carbon.

Research suggests that Britain is on course for a subsidy-free renewables "revolution" that could add 18GW of new capacity by 2030 and attract £20bn of investment.

The centrepiece of the UK’s renewables investment plan is the offshore wind sector, which plans to invest £17.5bn in the UK up to 2021, after generating a record low strike-price of £57.50 per MWh in the latest Contract for Difference (CfD) auction. Onshore wind is also finding new routes to market, according to EY, as old wind farms are upgraded with more powerful turbines.

“It was widely expected that many projects would be unable to compete in this post ROC environment but many of the new projects are beginning to compete in this new world,” the report stated.

Elsewhere in RECAI’s top 10, China held onto top spot for the third time consecutively while India fell from second to fourth, being surpassed by the US and Germany.

EY noted in its previous report that India was in danger of being overtaken due to cancellations to wind energy power purchase agreements (PPAs) and steep falls in tariff bids in recent auctions.

These issues have since been compounded by the threat of a 70% solar panel import tariff as well as disputes between developers and distributors, leaving the country’s plans to build 175GW of renewable energy generation by 2022 “looking increasingly over-ambitious”, according to the report.

The US climbed one place, despite tariffs on imports of solar PV cells and modules being set at 30% in January, with RECAI noting that these tariffs are mostly absorbed while wind projects are spared subsidy cuts in the Tax Reform Bill.

EY predicts that the falling cost of battery technology globally, combined with costs of electricity from renewable sources falling year-on-year worldwide, will facilitate further rapid growth of the renewables sector in coming years.